COMPETITION TRIBUNAL
REPUBLIC OF SOUTH AFRICA
Case No: 25/LM/Mar06
In The Large Merger Between
ApexHi Properties Ltd Acquiring firm
And
MICC Properties (Pty) Ltd Target firm
Reasons for Decision
Approval
1. On 17 May 2006, the Tribunal unconditionally approved the proposed
merger transaction between the abovementioned parties. The reasons for the
decision follow.
Parties
2. The acquiring firm is ApexHi Properties (“ApexHi”) a variable rate stock
company listed on the Johannesburg Stock Exchange in the real estate
sector.1 No single firm controls ApexHi. The primary target firm is MICC
Properties (Pty) Ltd (“MICC”) a property investment company and is a wholly
owned subsidiary of MICC Property Income Fund (Ltd) (“MICC Property”).
MICC Property is a holding and investment company, which owns various
properties indirectly through its property owning subsidiaries (“MICC Group”).
Transaction
3. The transaction involves ApexHi acquiring various lettable properties from
MICC.
Rationale of the transaction
4. The rationale for the transaction is that Vukile Property Fund Limited, the
holding company of MICC, made an offer to acquire the issued share capital
of MICC to minorities, one of which is ApexHi. ApexHi did not want cash but
properties, and therefore a portfolio of properties comprising of rentable office
1 Its shareholders are Redefine Income Fund 10%; Marriott Property Fund 9%; Stanlib 6% and other
74%.
1
(B grade) space, rentable retail space in the local convenience sector and
rentable light (secondary) industrial space, were submitted to Apexhi and they
elected the properties. 2 The primary target firm is about to delist from the
Johannesburg Stock Exchange and is therefore disposing of the targeted
properties.
The merging parties activities
5. ApexHi owns and rents out properties in retail, office and industrial
categories. MICC Group’s property portfolio comprises commercial, retail and
industrial space located throughout South Africa.
Relevant Product and Geographic Market
6. The Commission defines the relevant market as the market for the
provision of grade B office space in the Witbank and Welkom nodes and in
the provision of light industrial space in Strijdompark node. The Commission
also found that there is an overlap in respect of the following products
markets: office space (GradeB) and light industrial space. According to the
Commission the geographic overlap occurs in respect of Grade B office
property in the Witbank node in Mpumalanga, and Welkom node in the Free
State province. The commission’s investigation also revealed that in the light
industrial space market geographic overlap occurs in the Strijdompark node,
Randburg.
Competition Analysis of the Merger
Grade B Office space in the Witbank node
7. The Commission’s investigation revealed that the merging parties would
enjoy a combined post merger market share of 2.36% in the market for Grade
B office space. The Commission also found that numerous players including
Laeveldtrust Beleggings Beperk, ABSA and Old Mutual compete in this
market. According to the Commission the market share is not significant so
as to raise competition concerns. We agree with this conclusion, as the
combined market shares of the merging parties will remain low in this market.
Grade B office space in the Welkom node
8.The Commission’s investigation revealed that the merging parties would
enjoy a combined post merger market share of 10.52%. According to the
Commission the parties compete in the Free State region with Georgiou Trust,
2 A detailed list of the properties to be acquired can be found in page 3334 of the Record
2
National Real Estate, Freestone Properties, and Property House. According
to the Commission the merger is unlikely to raise any competition concerns,
as the market shares remain low. We agree with this conclusion.
Retail Space in the Mkhuze Node KwaZulu Natal
9.In this node the parties in their filing had indicated that there is an overlap in
the retail local convenience space, but the Commission had alleged, relying
on IPD property classifications that there is no overlap. When asked by the
Chairperson about this discrepancy, Mr Deon Feinblum (Executive Director of
ApexHi) clarified that Mkhuze has only one street in which all retail outlets are
located, so that there was indeed an overlap. However he stated that post
merger the merged firm’s share of the retail letting market would not exceed
between 10 to 15%. The combined market shares of the merging parties
would remain low in this market and we therefore find that the transaction is
unlikely to substantially prevent or lessen competition in this market.
Market shares for light industrial space in Strijdompark node
10. The Commission’s investigation revealed that the merging parties would
have a combined market share of 8.7%. The Commission also found that the
merged parties compete with Metboard Properties, Old Mutual, Allan Gray,
Marriot Property Fund and Capital Property Fund. According to the
Commission the market share will remain low and therefore the transaction is
unlikely to substantially prevent or lessen competition in this market. We
agree with this conclusion.
Public interests
11.No public interest issues arise from this merger.
Conclusion
12. We conclude that the merger will not lead to a substantial lessening or
prevention of competition in the identified markets and is accordingly
approved.
___________ 26 May 2006
N Manoim Date
Concurring: U Bhoola and M Holden
3
For the Merging Parties: Ms Vani Chetty (Edward Nathan)
For the Commission: Leonard Lamola and Seema Nunkoo (Mergers and
Acquisitions)
4